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Introduction to risk management – Semester 2, 2024
1. Which of the followings describes the definition of risk as defined in AS ISO 31000:2018?
Select one:
a) Risk equals the expected loss
b) Risk is the effect of uncertainty on objectives
c) Risk is a condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for
d) None of the above
2. A heuristic is any approach to problem solving that employs a practical method not guaranteed to be optimal or perfect, but sufficient for the immediate goals.
Select one:
True
False
3. A new employee is told by his colleagues to ignore password security protocols and to share his password with others. Not wanting to disappoint his colleagues, the employee shares his password. Which theory best explains his behaviour?
Select one:
a) Habituated action theory
b) Social action theory
c) Risk compensation theory
d) Protection motivation theory
4. Two events are mutually exclusive when the outcome of the first event influences the outcome of the second event.
Select one:
True
False
5. The maximum amount of risk that an organisation is able to support in pursuit of its objectives is known as its risk appetite.
Select one:
True
False
6. A manufacturer is concerned with the reliability of a component supplier. Risk analysis shows that the likelihood of delayed shipment is “possible”. Which of the following statements best describes the probability of a delay?
Select one:
a) Greater than 0% and less than 100%
b) 100%
c) 0%
d) 50%
7. A firm’s CRO wishes to identify downside risk factors using Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. Which of the following components of SWOT analysis is suitable for the task?
Select one:
a) Strengths and Threats
b) Opportunities and Weaknesses
c) Strengths and Weaknesses
d) Threats and Weaknesses
8. An event that has an uncertain impact on a firm’s objectives is considered a risk even if its likelihood of occurring is certain.
Select one:
True
False
9. A risk treatment that retains the activity but decreases the chance of an adverse event happening is best described by which of the following?
Select one:
a) Retaining the risk by informed decision
b) Avoiding the risk
c) Likelihood control
d) Consequence control
10. Which of the following is a formal written document, approved by the Board, which identifies the types of risks the firm is willing to take and sets out the quantitative tolerances of those risks?
Select one:
a) Risk register
b) Risk appetite statement
c) Business continuity plan
d) Risk management policy
11. Black Swan events can be categorised into which of the following types of events?
Select one:
a) Known-Unknowns
b) Unknown-Knowns
c) Known-Knowns
d) Unknown-Unknowns
12. Which of the following correctly describes the order of steps involved when undertaking the AS ISO 31000:2018 risk management process?
Select one:
a)Establishing the context, Risk identification, Risk analysis, Risk evaluation, and Risk treatment
b) Establishing the context, Risk analysis, Risk evaluation, Risk Identification, and Risk treatment
c) Establishing the context, Risk evaluation, Risk analysis, Risk Identification, and Risk treatment
d) Establishing the context, Risk evaluation, Risk analysis, Risk Identification, and Risk treatment
13. If an individual overestimates their ability to forecast accurately, they are demonstrating which perception bias?
Select one:
a) Excessive optimism
b) Reversion to mean
c) Calibration bias
d) The above average effect
14. The risk criteria explains how the Board’s risk appetite is to be interpreted in the organisation and therefore should not be regularly reviewed in the risk management process.
Select one:
True
False
15. Which of the following statements is TRUE?
Select one:
a) The risk framework informs and guides all aspects of the organisation’s approach to risk management and provides a diagnostic tool to evaluate the adequacy of its risk management
b) Risk principles are the set of components that provide the foundations and organisational arrangements for designing, implementing, monitoring, reviewing and continually improving risk management throughout the organisation
c) The risk process is the systematic application of management policies, procedures and practices to the activities of establishing the context, and identifying, analysing, evaluating, treating, monitoring and reviewing risk
d) All of the above
16. Which of the following is NOT an element of the risk criteria?
Select one:
a) How likelihood is measured
b) How consequence is measured
c) Methods to identify the sources of uncertainty that may influence the likelihood of the organisation achieving its objectives
d) How likelihood and consequences are combined
17. Before implementing a new reconciliation process, the likelihood of internal fraud was estimated to be 10%. A new control is considered 100% effective. The likelihood of internal fraud after the new control is
a) 0%
b) 10%
c) 100%
d) 0.1%
18. Which of the following describes the risk preference of an individual who is willing to avoid or reduce the amount of uncertainty they face?
Select one:
a) Risk seeking
b) Risk averse
c) Risk neutral
d) Loss averse
19. In the Three Lines of Defence model of governance, which of the followings best describes the responsibilities of the Second Line?
Select one:
a) implementing risk treatments and maintaining effective controls
b) providing independent assurance to oversight bodies and the Board
c) developing and maintaining an effective risk management framework
d) owner of the risk
20. A human failure that arises from a wrong intended action that could otherwise be avoided by further training is best described by which of the following?
Select one:
a) A mistake
b) An attentional failure
c) A violation
d) A lapse